The Secret to 10 to 1 Return on Your Marketing Investment: Think it Through!

Greg provides a closer examination of the costs and steps associated with executing a high-quality marketing campaign, and the amazing results that can be expected when you do. (Does 10 times return on investment sound good to anyone?)

Over the last 20 years, I have taken countless phone calls from brokers and agents who call me up and say something like, “Greg, I have been running some ads over the last three to six months and they are just not producing the results I believe I should be getting. Can you create advertising campaign that will get me better results?”

Like any good marketing person, I start by asking questions about the campaign, the target market and the objectives the agent is trying to accomplish. During this process, I am looking to see if they have applied fundamentally good marketing concepts in creating their campaign. To figure out why an agent is not getting good results, I have to find out if the agent has a meaningful UMD (Unique Marketing Differentiator). Is the UMD appropriate for the target market they are trying to reach, the publication in which the ad is in, and is the UMD consistent with the agent’s style and personality at a core level? Do the ads clearly communicate the message, reinforce each other to build name recognition over time, and do they tie into the rest of the agent’s marketing materials and image in the marketplace?
Next, I delve into the follow-up process to determine how many calls have come in, how the calls were handled and by whom, what was sent to them immediately after the call, and what follow-up materials were sent and at what frequency.

Is Success Too Much Trouble?
Unfortunately, what I uncover is the agent does not know the answers to my questions and they are really just not interested in finding them out. After spending a lifetime helping agents create advertising, I have come to believe that the success of an advertising campaign has very little to do with the brilliance of a particular ad, but has everything to do with the thinking, planning, execution and follow up that come before and after an ad actually hits a publication.

The problem is that most agents simply do not want to put the time and effort into doing it themselves and are unwilling to spend the money to hire a professional to do it for them. They end up going the FSBO route of planning, writing, designing and executing their ad campaign. Agents will look at how much an ad agency wants to write an ad, and they believe they have some very clever ideas themselves, so how hard could it be? Unfortunately, when the ads don’t get the results they want or expect, they blame the publication, the timing or the economy. In short, they blame everyone and everything other than themselves. I believe that is why we see so much bad copycat real estate advertising year after year.

No Short Cuts
Fortunately, some agents finally get tired of spending money on ineffective advertising and marketing and come to the realization that unless they want to spend the rest of their real estate careers cold calling, holding open houses every weekend, and chasing FSBO’s and expireds, that they simply have to become good at marketing and advertising so that they can attract a steady flow of clients who want to do business with them. If you find yourself at this point in your real estate career, let me teach you how to create an advertising campaign that will get great results every time. First, understand that it’s not difficult but it does take work. Digging a ditch is not intellectually difficult but it is hard work and there are no short cuts. You have to put the shovel in the ground and move the dirt one shovel at a time. The same is true with creating an effective advertising campaign. So let’s get started.

Step #1: Define Your Intent
The first thing you have to do is decide what you are trying to accomplish and in very specific terms. Over the years, agents keep telling me that they simply want to make the phone ring. My reply is always the same, “You don’t need me.” I tell them that they should run an ad that says, “Free Money call 800-555-1212” and their phone will ring a lot. Then they say they are looking to get calls from people looking to buy a home and I’ll tell them they still don’t need me and to simply run an ad that says “Homes for sale 20% below market, no money down, no credit check and $1000 cash towards your moving expenses when it closes.” They say, “I don’t have any homes that meet those terms.” I say, “that’s not my problem, you simply asked me to create an ad that makes the phone ring with people who are interested in buying a home, and that ad will make the phone ring with people who want to buy a home.”

I hope I have made my point that the first step in creating a great ad campaign is to clearly define what you are trying to accomplish.

Think it through until you can define something like, I want my ad campaign to generate calls from people who are qualified to buy a $400,000 to $700,000 home in the Oakbrook area. My ideal client is a couple in their 40s, whom both work, have 1 to 3 kids, they typically would move up to Oakbrook from Cromwell and Covington Crest, most are college graduates working in professional jobs and have a combined family income of between $80,000 and $150,000. Quality of life, family and their kids’ education are key motivators for this group and fit well with my lifestyle niche as “Oakbrook’s Values Driven Realtor(R).” Now you have something that you can work with and that you can shape your campaign around.

Step #2: Determine Your Media Options

Next you need to ask what media options do you have available to deliver your message. Every market has different media options; as an agent you have to look at each option and ask, “Does this publication reach my target audience?” “What is the cost per person of reaching my audience?” and “Can I stand out in this publication versus my competitors?”I recently had an agent call and ask me whether I thought she should place a direct response ad that would offer a free special report titled, “The Truth About Real Estate House Advertising,” in an effort to get more listings in her farm area. She was thinking about running the ad in the Daily Post, a paper that served her area and had a total distribution of over 100,000 people. The cost of the running an ad in the full publication just to reach the 5000 homes in her target market could not be justified, but upon doing a little investigation I found she could run an ad in the north section that reached 19,000 people and included about 90% of her farm.
She had attended one of our training events and remembered that I had stressed the importance of running an ad consistently over time. She said that she could get about a 30 percent discount per placement if she would sign a yearlong contract to advertise a quarter-page ad once a week for a year. The overall cost turned out to be $390 per quarter-page ad, or $20,280 annually, paid monthly about $1,690 per month. I reminded her the importance of running image or branding building ads consistently because they worked purely by repetition over time, but that direct response ads were designed to appeal to only the small segment of the market that has a short term need to buy or sell. I suggested that she run a combination ad, that had the top half of the ad designed to build her personal brand, establish her name recognition and UMD to all 5000 people in her farm. The bottom half would be a direct response offer for the sellers special report designed to stimulate calls from sellers who were thinking about selling three to six months from now.

Think It Through
The key is to think the process through, plan exactly what needs to happen, the costs and what you expect in return. First, she needed to print 100 special reports with a full-color cover and with digital printing – she found this would cost her $390.00 or $3.90 per special report. In addition, I suggested she send a simple cover letter and her oversized relationship building personal brochure in a nice 9 x 12 envelope, adding another $1.70 of printing costs and $1.60 to send via first class mail. I also strongly recommended that she use a fulfillment house to send out the packages at a cost of $5.00 per package mailed. This would bring the total cost of the first mailing to $12.20 each. After that she would put each person who responded into a special follow-up farming campaign consisting of two over-sized, full-color, brand building post cards mailed out each month, as well as one personal letter per quarter to each person. She hired Hobbs/Herder to create the 24 follow-up post cards for the year at a creative cost of $3,000.00 and it cost $1.12 for printing, postage and handling of each card to have them mailed out.

As we were going through this process, my client told me she was exhausted just thinking about it and that we should stop working on it because she knew that there was no way it would make enough money to cover all the costs. So I encouraged her to look at what we might expect from a campaign like this. The ad is going to run in a paper going to 19,000 readers, and my experience tells me that 50 percent of the readers are never going to see our ad. That leaves 8,000 people exposed to the message 52 times over a year.

Eight Leads a Week – to Start
Let’s assume that when you start, you are totally unknown, and therefore, your response rates will be low. Let’s say you get one tenth of one percent response rate from people asking for your special report. That would eight requests per week to start. After three months, your name would start to have some small amount of recognition and you might increase your response rates up to say, 13 per week. After six months, it would be 20 per week and after nine months it climbs to one fourth of one percent response per ad, or 32 per week. So in the first quarter you would generate 104 leads (8 x 13 weeks). In the second quarter you would get (13x 13) 169 leads, in the third quarter you would get 260 and in the fourth quarter you would get 384 for a total of 917 total requests for your special report. The next question is what is your conversion rate out of those 917 requests.

Traditionally, if you only sent out your special report I would expect an agent to close two or three percent of them or 18 to 27 closed transactions, but since you have been mailing them 2 pieces per month and most people call three to six months before they buy or sell, your follow-up system will push your conversion ratio up to 10 to 15 percent or more. That would be between 90 and 135 closed transactions from your campaign. If your average sales price is $400,000, at a 2.5 percent average commission, that would be $900,000 in gross commissions. Assuming you have a 70% split with your broker, that is $630,000 in income.

10:1 Return on Investment
So now lets go back and see what it cost. $4,500 in creative fees to have a series of three ads created $20,280 to run the ad, 917 responses x $12.20 for the first mailing for a cost of $11,187.40, $3,000 in creative fees to create the 24 piece follow-up cards, 917 x 24 follow-up mailings at $1.12 including postage and handling, for a total cost of $24,648.96. The grand total would be $63,616.36 in costs. By thinking it through step by step, you have created a ROI of 10 to 1.

Best of all, once you start the campaign, it all happens automatically. No matter how busy you get, your cards are sent for you, the ads keep running and you are getting people who are excited about doing business with you. Best of all, your money is leveraged in a positive way and you are not throwing it down the drain. It all comes from taking the time to think and plan before you invest your marketing dollars.

I’d love to know what you think of this article. Send any questions or comments to me at Greg.Herder@HobbsHerder.com.